Health Care Spending and Health in GDP

The Washington Post had an interesting piece on how people with chronic conditions, such as high blood pressure, can now have key measures monitored remotely on an ongoing basis through a new program. This will allow for health care professionals to quickly detect problems and recommend steps to counteract them or to see a physician for care, if needed. As the piece points out, this is likely to lead to both better health outcomes and lower costs, as many patients may take steps to alleviate problems before they become life-threatening issues and need emergency care.

While this program as described in the piece sounds like a substantial improvement in health care, it is interesting how it would appear in our national income accounts and measures of health care inflation. If better monitoring of blood pressure and other risk factors leads to fewer strokes and heart attacks, and therefore fewer people coming in for treating emergencies, it will mean that less health care is being provided in our GDP accounts.

The savings also would not appear as a reduction in health care costs in measures like the Consumer Price Index (CPI). The CPI measures the increase in the price of specific goods and services. If we need fewer services because we have found ways, such as better monitoring, to improve people's health, it is not picked up in the index.

This method of accounting is why some of us have advocated pulling health care spending out of GDP measures instead looking at what we spend net of health expenditures and then using various measures of health status to determine the extent to which we are making progress. After all, we care about how long and how well people live, not how many bypass surgeries they receive.